Starmer promises stability despite fiscal challenges: No growth-inhibiting measures in the upcoming budget

Amid growing concerns in the financial world, Sir Keir Starmer has assured that the next budget will not include measures that hinder economic growth. The Prime Minister is facing increasing speculation that he intends to fill the budget gap by raising taxes on businesses. During a trip to Rome, Starmer emphasized that Finance Minister Rachel Reeves will not make decisions that harm the economy. "If it promotes economic growth, it goes in the yes column – if it hinders growth, it goes in the no column," he explained. Nevertheless, business leaders remain skeptical. Stabilizing public finances is a prerequisite for economic growth, Starmer continued. This could provide him with the leeway to justify tax increases on wealth creators. However, he has ruled out increases in income tax, VAT, corporate tax, and National Insurance contributions for employees. This has sparked speculation that he might target wealthier Britons and entrepreneurs to plug the purported £22 billion budget gap. Increases in capital gains tax and National Insurance contributions for employers are on the table, as well as higher taxes for banks. Tax hikes for private equity managers, non-domiciled individuals, and oil and gas companies have already been announced. When asked whether the economy is rightfully concerned, Starmer said: "Economic growth is this government’s top priority, and all decisions will be aligned with that." However, he added that stability is essential for economic growth and that the government will make tough decisions to close the budget gap. Starmer made these remarks following a meeting with Italian Prime Minister Giorgia Meloni and defended himself against criticisms of being overly pessimistic. He and Reeves plan to present the anticipated benefits for jobs and growth at the annual Labour conference in Liverpool, should fiscal discipline be enforced early in the legislative period. On Monday, eight leading economists, including Lord Gus O'Donnell and Lord Jim O'Neill, warned against cuts in public investments in the UK. In a letter to the Financial Times, they stressed that reducing investment spending could undermine the economic foundation. Starmer responded cautiously to the question of whether he would consider easing the UK's fiscal rules to give the government more room for investment. He did not rule out the possibility and underscored the importance of strong fiscal rules. He warned that unfunded spending commitments are as damaging as unfunded tax cuts, similar to those proposed by former Prime Minister Liz Truss in her controversial "mini" budget of 2022.